WeWork, backed by SoftBank, has filed for bankruptcy protection in the US. The company's plans went awry when the firms it bet on to use its office-sharing space did not perform as expected. SoftBank acknowledges that WeWork can only survive if it renegotiates its costly leases during bankruptcy. WeWork's profitability has been elusive due to expensive leases and corporate clients cancelling because of remote work. The company reported estimated assets and liabilities ranging from $10 billion to $50 billion. WeWork's founder, Adam Neumann, pursued aggressive growth strategies at the expense of profitability, leading to his departure and disrupting the company's anticipated public market debut. SoftBank intensified its financial commitment to WeWork and orchestrated a merger with a special purpose acquisition company, valuing it at $8 billion. However, the COVID-19 pandemic severely undermined WeWork's efforts, as remote work became the norm. WeWork heavily relied on startups and smaller businesses as clients, but these sectors reduced their expenditures. The company also faced competition from traditional landlords offering flexible leasing options. Despite debt restructurings, WeWork's survival remained uncertain, and it negotiated a reprieve from creditors to buy more time for negotiations.
WeWork is in the process of renegotiating its lease terms with landlords as it seeks to restructure its lease obligations, which it considers to be the primary challenge to its profitability. The company aims to slash expenses by restructuring leases, as its occupancy rates in the US are not high enough to offset the costs of taking on space. WeWork has already exited or amended 590 leases since Q4 2019 and has cut $12.7bn in future lease payments. The company's lease renegotiations involve its consolidated locations, which total 610 across 33 countries and include about 715,000 workstations. WeWork's largest US landlords include Beacon Capital Partners, Boston Properties, and the Chetrit Group. Landlords are motivated to renegotiate leases with WeWork due to protections in their lease agreements, such as letters of credit issued by banks. However, some landlords may be more willing to renegotiate if they are not in a secured position. WeWork's lease talks with landlords are expected to be completed within 45 days.
In another bankruptcy filing, View Inc., a window-maker partly owned by SoftBank Group, has filed for bankruptcy with a proposal to turn itself over to lenders in exchange for reducing its $359 million debt load. The company's term-loan lenders and 90% of noteholders back the proposal. The bankruptcy filing states that View has $291 million in assets and its biggest unsecured debt is $222 million owed to noteholders. Investment firm Cantor Fitzgerald and RXR Realty have signed a restructuring agreement backing the bankruptcy proposal. View will continue to pay its suppliers and serve customers during the bankruptcy.
A US bankruptcy judge approved WeWork's Chapter 11 bankruptcy plan, allowing the company to discharge $4 billion in debt and transfer equity to lenders and Yardi Systems. WeWork filed for bankruptcy in November 2023 after incurring losses due to an overly large real estate portfolio. The bankruptcy filing allowed WeWork to renegotiate future rent rates, cancel contracts at one-third of its facilities, and reduce future rent liabilities by over $12 billion. WeWork plans to operate 337 shared office spaces after emerging from bankruptcy. The company rejected a buyout proposal from co-founder Adam Neumann and will cancel existing equity shares. SoftBank, WeWork's largest stakeholder, will retain a minority ownership holding. WeWork's post-bankruptcy equity is estimated to be $750 million. The company's reputation suffered after a failed IPO in 2019 and financial problems worsened during the COVID-19 pandemic. [f9fcd8c8]